Israel on Monday approved the release of 441 Palestinian prisoners and pledged not to build any new settlements in the West Bank, but it stopped short of American demands to halt construction in existing settlements before a crucial U.S.-hosted Mideast conference.

The Cabinet vote took place ahead of a meeting between Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas, who tried to break a deadlock in preparations for the U.S.-hosted peace summit, which is expected to take place in Annapolis, Md., next week.

Israel sees the conference primarily as a ceremonial launching pad for new peace efforts, while the Palestinians want a more detailed plan for how post-conference talks will proceed.

Olmert's spokeswoman, Miri Eisin, said progress was made during the 90-minute meeting. She did not elaborate, but said negotiators would meet Tuesday to continue their work.

Seeking to drum up support for the conference, Olmert is heading to Egypt on Tuesday for talks with President Hosni Mubarak, his office said. Arab League members are to decide on Friday whether they will join the gathering. High-level Arab attendance is seen as crucial to the success of nascent peace moves.

With the outcome of Annapolis uncertain, Israel has been under U.S. pressure to take steps, including a settlement freeze and a large-scale release of Palestinian prisoners, to bolster Abbas.

The U.S. State Department said it had not yet spoken with the Israeli government about the Cabinet decisions but welcomed reports of the moves ahead of the Annapolis meeting.

"If the news reports hold up then these would be important steps in advance of the Annapolis conference, important confidence-building measure steps," spokesman Sean McCormack told reporters.

He declined additional comment but said planning for the meeting continued although invitations for the event would not likely be issued on Monday.

The Cabinet overwhelmingly approved Olmert's proposal to release 441 prisoners. Although the release would be the largest in years, it fell short of Palestinian calls to free some 2,000 prisoners. Israel holds an estimated 9,000 Palestinian prisoners.

"We welcome the release of any prisoners," said Palestinian Foreign Minister Riad Malki. "But this is not enough. We will continue demanding the release of all prisoners."

A settlement freeze, and a related promise Monday to dismantle tiny settlement outposts, are key aspects of the "road map," a U.S.-backed peace plan that stalled shortly after its inception in 2003 because neither Israel nor the Palestinians met initial obligations. The Palestinians, for their part, were supposed to crack down on militants. The U.S. has been trying to revive the road map ahead of the peace conference.

Olmert told his Cabinet that Israel would not build any more settlements in the West Bank. "Let's be straight, we committed ourselves in the road map not to build new settlements and we will not build any," Olmert was quoted as saying by his spokeswoman, Miri Eisin.

However, he made no promise halt construction in existing settlements, as required by the road map.

"We won't choke off under any circumstances the existing settlements," Olmert said, according to another meeting participant. He spoke on condition of anonymity under Israeli civil service guidelines.

Israel has built no new authorized settlements in nearly a decade. But it has continued to rapidly expand existing settlements to accommodate what it calls "natural growth" in the settler population.

Palestinian officials reacted coolly to Olmert's announcement.

"He omitted from the Israeli obligation in the road map that the Israeli government must freeze all settlement activity, including natural growth," Palestinian negotiator Saeb Erekat said. "Either it's a 100 percent settlement freeze or no settlement freeze. There is nothing in the middle."

Olmert and Abbas have been meeting frequently to lay the groundwork for the U.S. conference.

Shortly before arriving in Jerusalem, Abbas said he hoped his meeting with Olmert would yield progress.

"We want to continue our talks regarding the preparation for Annapolis, and we need to hear from him (Olmert) things that will satisfy us, so we can go to Annapolis on a solid basis," Abbas told reporters shortly before his meeting with Olmert in Jerusalem.

The two men were seen smiling and warmly embracing each other at the beginning of their meeting at Olmert's official residence. Negotiators from the sides smiled and made small talk, and Abbas paused to sign the residence's guest book.

Eisin, the Israeli spokeswoman, said talks focused on carrying out the road map, as well as efforts to form a joint blueprint for peace, which they hope to present to the conference next week.

"There is progress," she said, adding that negotiating teams would meet later Tuesday to continue work on the joint document.

But Erekat said there were "serious problems" in the preparations.

At the summit, Israel and the Palestinians hope to renew formal peace talks, which broke down in violence seven years ago. The U.S. also hopes the gathering will give an international boost to Abbas in his power struggle against the Hamas militant group, which now controls the Gaza Strip. However, preparations have run into trouble.

The Palestinians want the conference to address issues at the heart of the conflict with Israel, such as the borders of a future Palestinian state, shared sovereignty over disputed Jerusalem and the fate of Palestinian refugees. Israel says the summit should be a forum to formally renew talks, with discussions on core issues to follow.

"The negotiations will start after Annapolis and it will be very intensive, very serious," Olmert told reporters at the beginning of the Cabinet meeting. "It will deal with all the core issues that are a part of the process that has to lead for two nation states for two nations."

Amid the disagreements, the U.S. has not announced an official date or invitation list for the summit.

In a boost for peace efforts, international Mideast envoy Tony Blair, Israel and the Palestinians announced a number of economic projects that could create tens of thousands of jobs for Palestinians.

Among the projects will be a Turkish-sponsored industrial park in the southern West Bank, a sewage project in northern Gaza, and road construction in the West Bank, a Palestinian official said.